Question

Read the extract given below and answer the questions that follow:

ET Bureau, Aug 01, 2022 Food prices may not ease this fiscal deficit and can throw India’s monetary policy makers a tougher challenge in bringing down inflation and anchoring inflation expectation, Crisil said on Monday. The recent rise in food inflation is mainly supply shortages-led, driven by both global geopolitical conflicts and impact of local heat waves. Other factors such as rising input costs in agricultural production have played their part too. The surge in food prices is accompanied by high fuel and core inflation following the? Russia- Ukraine war, keeping inflation consistently above the Reserve Bank of India's upper target band of 6% for the past few months. “This has put monetary policy in a quandary and made it imperative for the central bank to look closely at factors pushing up food prices.” Crisil said, predicting overall CPI inflation at 6.8% and food inflation at 7% for the current fiscal.

1.                                                     
   
   1. What is meant by inflation?      2
   2. How is creeping inflation different from waling inflation?     2
   3. Explain the impact of inflation on:       3
      
      1. Wage earners and salaried class
      2. The investors
2.                                                     
   
   1. What do you mean by division of labour?       2   
   2. Explain any two advantages of division of labour.    3
   3. 'Labour as a factor of production differs from other factors of production.’ In this context explain any two features of labour.     2

Answer 1

1. 
   
   1. Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It indicates a decrease in the purchasing power of a currency, as consumers need more money to buy the same quantity of goods and services.
   2. Walking inflation, or moderate inflation, occurs when there is a yearly increase in prices ranging from 3% to 6%. On the other hand, creeping inflation, or mild inflation, is characterized by a rise in prices between 2% to 3% within a year.
   3. 
      
      1. Inflation poses challenges for individuals with fixed incomes, as the rate of wage increase typically lags behind the pace of rising prices. This leads to a decline in the real purchasing power of those earning fixed incomes. The disparity between wage growth and inflation puts pressure on maintaining a satisfactory standard of living, as the cost of goods and services outpaces the growth in wages.
      2. Investors are greatly concerned about inflation as it can significantly affect the value of their investments. As prices increase, the diminishing purchasing power of money can result in a decline in the real value of investments.
2. 
   
   1. Division of labor is the practice of assigning specific tasks to workers, with each worker specializing in performing a particular task or set of tasks. This specialization enables workers to enhance their skills and efficiency in their designated roles, leading to increased productivity and reduced costs.
   2. Two advantages of division of labour are as follows:
      
      1. Increased Efficiency and Expertise - Division of labor enhances workforce efficiency by allowing individuals to specialize in specific tasks. This specialization leads to higher expertise and proficiency, resulting in quicker and more accurate task execution. The repetition of tasks contributes to improved productivity.
      2. Cost Reduction - Specialized workers in a division of labor system reduce overall production costs. Their efficiency minimizes time requirements, lowers the likelihood of errors, and streamlines workflows. These factors contribute to cost savings, making businesses more competitive in the market. 
   3. Labour as a factor of production differs from other factors of production in the following ways:
      
      1. Unlike other factors such as land and capital, labor is inseparable from its owner.
      2. Labor possesses intelligence and judgment, a characteristic not shared by any other form of production factor.